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PETITIONER: STATE OF ORISSA & ORS.

       Vs.

RESPONDENT: M/S. KRISHNA STORES

DATE OF JUDGMENT:       21/01/1997

BENCH: A.M. AHMADI, SUJATA V. MANOHAR

ACT:

HEADNOTE:

JUDGMENT:                       J U D G M E N T      Mrs. Sujata V. Manohar. J.      The respondents  is  a  partnership  firm  carrying  on business as  agents of  Hindustan  Lever  Ltd.,  Indian  Oil Corporation and  various other  corporations. The respondent carries on  whole-ale business  in  the  products  of  these companies and  has  its  registered  office  at  Kanatabanji District Bolangir in the State of Orissa. For the assessment year 1969-70 the respondent was assessed under Section 12(4) of the  Orissa Sales  Tax Act, 1947 (hereinafter referred to as the  said Act)  by order  dated 23.9.1970.  Thereafter on 26.11.1970, the  Vigilance Unit  of the Sales Tax Department seized the  books of  account and  other  documents  of  the respondent. On  the basis  of the report which was submitted by the  Vigilance Unit  the assessment  for assessment  year 1969-70 was  reopened. The  respondent was  reassessed under Section  12(8)   of  the  said  Act  under  an  order  dated 27.5.1972.  By  another  order  of  the  same  date,  namely 27.5.1972, an  assessment order  for assessment year 1970-71 was also  passed under  Section 12(4)  of the  said Act. The respondent filed  appeals in  respect of  both these orders. The appeals  were defective.  The requisite  court fees were not paid  and the  memo of appeal did not contain grounds of appeal. The  respondent was  called  upon  to  remove  these defects by  the office  of the  Sales  Tax  Department.  But despite reminders and notices, the respondent did not remove these  defects;  with  the  result  that  the  appeals  were summarily rejected  under Rule  49 of  the Orissa  Sales Tax Rules.      By notices  dated 15th of March, 1975 issued under Rule 80 of  the Orissa Sales Tax Rules, the Commissioner of Sales Tax in exercise of his power under Section 23(4) of the said Act proposed  revising the assessment orders dated 27.5.1972 for assessment  years 1969-70  and 1970-71. The Commissioner proposed a  suo motu  revision of the said orders because in his opinion  the respondent  had been  under-assessed and  a large amount  of turn-over  had  escaped  assessment.  These notices were served on the respondent on 21.3.1975. Pursuant to the  said notices,  the respondent  appeared  before  the Commissioner of Sales Tax. After taking several adjournments

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the respondent  requested the  Commissioner of Sales Tax for reasons for  issuing the  notice of  suo motu  revision. The reasons were  thereupon communicated  to the  respondent  on  .5.1975. Hearing  of the  case was  fixed on  7.5.1975. The respondent  made  his  submissions  in  writing  before  the Commissioner of Sales Tax. These submissions were considered by the  Commissioner of  Sales Tax. The respondent, however, did not explain the accounts or the entries appearing in the seized documents.  By a  detailed order dated 26.5.1975, the Commissioner of Sales Tax, after considering the submissions made by  the respondent,  revised the  assessment orders and demanded excess  taxes to  the tune  of Rs. 1,12,620 for the assessment year  1969-70 and  Rs. 79,710  for the assessment year 1970-71.      The respondent  filed writ  petitions before  the  High Court of  Orissa being  O.J.C. Nos.  1680 and  1681 of  1975 challenging the  said orders  of the  Commissioner of  Sales Tax. The  challenge was  two-fold. The respondent challenged the jurisdiction  of the  Commissioner of  Sales  Tax  under Section 23(4)  of the  said Act  read with  Rule 80  of  the Orissa  Sales  Tax  Rules  to  revise  the  assessment.  The respondent also  submitted that  it had  not  been  given  a reasonable opportunity of hearing before the Commissioner of Sales Tax.  Both these  contentions were  upheld by the High Court which quashed the impugned orders dated 26.5.1975. The present appeals  are from the judgment and order of the High Court dated 28.4.1977.      Section 23(4) of the said Act is as follows:      "23(4)(a): Subject to such rules as      may be  made and  for reasons to be      recorded     in     writing     the      Commissioner, may, upon application      by a dealer or on his motion revise      any order  made under  this Act  or      the rules  made thereunder  by  any      person other  than the  Tribunal or      Additional Tribunal,  as  the  case      may be, appointed under sub-section      (3) of Section 3 to assist him:      Provided  that   the   Commissioner      shall  not   entertain   any   such      application  for  revision  if  the      dealer filing  the  same  having  a      remedy by  way of appeal under sub-      section (1), or sub-section (3) did      not avail  of such  remedy  or  the      application is not filed within the      prescribed period."      Rule 80 of the Orissa Sales Tax Rules is as follows:      80. The Commissioner may of his own      motion, at  any time  within  three      years from  the date  of passing of      any order  by the  Assistant  Sales      Tax Officer  or by  the  Sales  Tax      Officer and  within two  years from      the date  of passing  of any  order      other than  an appellate  order  by      the Additional Commissioner, Deputy      Commissioner   or   the   Assistant      Commissioner, as  the case  may be,      call  for   the   record   of   the      proceedings in which such order was      passed and revise any such order.      The respondent  has contended that the Commissioner has no power  to suo  motu revise  the orders dated 27.5.1972 of

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the Sales  Tax Officer  because in  the present case appeals were preferred by the respondent from the said orders of the Sales Tax  Officer before  the Assistant Commissioner of the respondent’s failure  to cure  various defects.  It  is  the contention of  the respondent  that under Rule 80 a suo motu power of revision by the Commissioner cannot be exercised in respect of an appellate order. Since in the present case the orders of  the Sales  Tax Officer  have merged in the orders passed in  the two  appeals the  power of revision cannot be exercised by the Commissioner under Rule 80.      We have,  therefore, to consider whether in the present case the  Commissioner is  seeking to  revise any  appellate order passed  by the  Assistant Commissioner  of  Sales  Tax within the  meaning of  Rule 80. The notices which have been issued by  the Commissioner under Rule 80 seek to revise the assessment  orders   passed  by   the  Sales   Tax  Officer, Undoubtedly, the respondent preferred two appeals from these assessment orders before the Assistant Commissioner of Sales Tax. These  appeals, however, were rejected under Rule 49 of the Orissa Sales Tax Rules. Rule 49 which deals with summary rejection of appeal is as follows:      "49. Summary Rejection of Appeal:      (1) If  the memorandum of appeal is      not in the specified form or if all      the requirements  of the  form  are      not  fully   complied   with,   the      appellate authority  may reject the      appeal summarily,  after giving the      appellant such  opportunity  as  it      may  think   fit  to   rectify  the      defects.      (2)  The   appeal   may   also   be      summarily rejected on other grounds      which shall  be reduced  to writing      by the appellate authority:      Provided  that   before  an   order      rejecting an  appeal is  passed the      appellant   shall    be   given   a      reasonable  opportunity   of  being      heard."      In the  present case  the appeals  have  been  rejected under Rule 49(1). This is clearly a rejection at the initial stage of  filing of  an  appeal  which  is  defective.  Such rejection is before the appeal is taken up for consideration by the appellate authority. An order rejecting the appeal on the ground  that it is not in the specified form or that all the requirements  of the  form are  not fully  complied with cannot be  considered an  appellate order within the meaning of Rule  80. Rule  49(1) clearly  provides that such summary rejection can  take place  after  giving  the  appellant  an opportunity to  rectify the defects. This is not a rejection or dismissal  of an  appeal after  hearing the  appellant on merit. Such an order would not qualify as an appellate order under Rule 80. The purpose of a revision by the Commissioner suo motu  is  to  ensure  that  the  assessee  is  correctly assessed relating  to his  tax liability.  If  there  is  an appellate authority  which  has  considered  the  assessment order then  the Commissioner  cannot  suo  motu  revise  the order.  The   department  would  then  have  to  follow  the procedure laid  down for  challenging the  appellate  order. When, however,  an appeal  is not accepted for consideration at all  because of  defects there  is  no  question  of  the department being  required to follow the procedure laid down for challenging  such an  order. Rule  80, when it refers to the Commissioner  exercising a suo motu power of revision in

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respect of  orders  other  than  appellate  orders,  clearly contemplates an  appellate order  which has  considered  the original assessment  order on  merit in  some  form  or  the other. An  order rejecting  an appeal at the stage of filing cannot be considered as an appellate order in the context of Rule 80.      Our attention has been drawn by learned advocate of the respondent to  somewhat similar provisions of Section 263 of the Income  Tax Act  of 1961,  and cases  relating to it. We will refer  only to a few of those cases. Under that section the Commissioner  has the power to suo motu revise any order passed by  the Income-tax  Officer if  it is erroneous in so far as it is prejudicial to the interests of the revenue.      In cases  where the  appellate authority  had passed an order  disposing   of  the  assessee’s  appeal  against  the assessment order of the Income-tax Officer but had not dealt with all  the points  arising from  the Income-tax Officer’s order, a  question  arose  whether  the  Commissioner  could exercise his  power of  revision in  respect of those points which were  not considered  in  the  appeal.  Prior  to  the amendment of  Section 263  in 1988,  there was a conflict of opinion among  different High  Courts on this question. Some High Courts  were of  the view  that even  if all the points arising  from   an  Income-tax   Officer’s  order  were  not considered in  appeal, or even if in appeal the order of the Income-tax Officer  was confirmed,  the order of the Income- tax Officer  merged in  the appellate  order and, therefore, the Commissioner could not exercise his power of revision in respect of any point arising out of the Income-tax Officer’s order once  an appellate  order had  been passed. Some other High Courts,  however, held that the power of revision could not be  exercised only in respect of those points which were urged and decided in the appeal. In respect of points not so urged or  decided in  appeal, the power of revision could be exercised by  the  Commissioner.  It  is  not  necessary  to examine this question here.      This issue is now taken care of by an amendment made in 1988 in  Section 263  of the Income-tax Act. Explanation (c) to Section  263(1) after  amendment provides  that where any order referred  to in  this sub-section  and passed  by  the assess in  officer had been the subject-matter of any appeal filed on  or before  or after  the first  day of  June 1988, powers of  the Commissioner  under  this  sub-section  shall extend and  shall be  deemed always to have extended to such matters as  had not  been considered  and  decided  in  such appeal.      Prior to  this  amendment,  however,  in  the  case  of Commissioner of  Income-Tax, Bombay  v. Amritlal  Bhogilal & Co. (1958  [34] ITR 130) this Court was required to consider a composite  order passed by the Income-tax Officer granting registration to  a firm  under Section  26A  of  the  Indian Income-Tax Act,  1922 along  with an  order of assessment of the firm.  The firm had filed an appeal against the order of assessment which had been decided by the Appellate Assistant Commissioner. The court was required to consider whether the order of  the Income-tax Officer registering the firm can be revised  by   the  Commissioner  under  Section  33B  if  he considers that  as erroneous and prejudicial to the revenue. This Court held that he could. The order of registration was a separate  non-appealable order.  While  so  holding,  this Court said  that if  an appeal  is provided against an order passed  by   a  tribunal,  the  decision  of  the  appellate authority is  the operative decision in law if the appellate authority  modifies  or  sets  aside  the  decision  of  the tribunal. It  is obvious  that it  is the appellate decision

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that is  effective and  can be enforced. In law the position would be just the same even if the appellate decision merely confirmed the  decision of  the tribunal. As a result of the confirmation of  affirmation of the decision of the tribunal by the  appellate authority, the original decision merges in the appellate  decision and  it is  the  appellate  decision alone  which  subsists  and  is  operative  and  capable  of enforcement.  The   respondent  strongly   relies  on  these observations. However,  in  that  case  the  court  was  not required to  consider whether the power of revision could be exercised in  a case  where the  appeal was  rejected at the threshold without  any application  of mind by the appellate authority on the issues arising therein.      In the  case of  State of  Madras v.  Madurai Mills Co. Ltd. (AIR  1967 SC  681) this  Court, however, observed that the doctrine  of merger  was not  a doctrine  of  rigid  and universal  application.  The  application  of  the  doctrine depends on  the nature  of the appellate or revisional order in each  case and  the  scope  of  the  statutory  provision conferring  the   appellate  or   revisional   jurisdiction. Basically, therefore,  unless the  appellate  authority  has applied its  mind to the original order or any issue arising in appeal  while passing  the appellate order, one should be careful in  applying the doctrine of merger to the appellate order.      The respondent  strongly relied upon a decision of this Court in  Gojer Brothers  Pvt. Ltd. v. Ratan Lal Singh (1975 [1] SCR 394). In that case a decree for possession in favour of the  plaintiff was  passed by  the Munsif’s court. It was confirmed in  appeal and  the second appeal was dismissed by the High  Court. The  court said  that the  judgment  of  an inferior  court  if  subjected  to  an  examination  by  the superior court  ceases to  have existence  in the eye of law and is  treated as  being superceded  by the judgment of the superior court.  In other words the judgment of the inferior court loses  its identity  by its merger wit the judgment of the superior  court. This  was clearly  a case where at each stage the  appeal was  decided on merit. It has no relevance here. The  other case  relied upon  by the  respondent is of Sheodan Singh  v. Daryao  Kunwar (AIR 1966 SC 1332). In that case the  trial court  had decided  two suits  having common issues on  merit. There  were two  appeals therefrom. One of them was dismissed on the ground of limitation and the other on account  of default in printing. With the result that the trial court’s decision stood confirmed. This Court said that the decisions  of the  appeal court  will be res judicata as the appeal  court must  be deemed  to have heard and finally decided the  matter. The entire controversy before the court related to the application of the doctrine of res judicata.      The power  to revise in a taxing statute, however, will have to  be examined  in the context of the statute. We have to consider  whether an  order rejecting  the appeals  under Rule 49(1)  precludes the Commissioner form exercising power under Section  23(4) read  with Rule 80. Under Section 23(4) the Commissioner  can, inter  alia, on his own motion revise any order  made under  this Act  or the  Rules by any person other than  a tribunal or an additional tribunal. Therefore, under this  sub-section the  Commissioner is  not  expressly prevented from  revising an  appellate order  if made by any person other  than the  tribunal or  an additional tribunal. Under Rule  80, however,  the Commissioner  may, of  his own motion revise  any order  passed by  the Assistant Sales Tax Officer or  the Sales  Tax Officer  within three  years. The Commissioner can  also suo  motu revise within two years any order other than an appellate order passed by the Additional

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Commissioner,  the  Deputy  Commissioner  or  the  Assistant Commissioner. In  the context  of Section  23(4)  where  the words any  order other  than an appellate order" are absent, the prohibition  against revising an appellate order in Rule 80 should be taken as applying only to an appellate order in its  full   sense  i.e.  an  order  which  is  passed  after considering any  issue arising in appeal. It would not cover an order  of rejection  under Rule 49(1), when the appeal is not entertained at the threshold for consideration.      It is  next contended that the respondent was not given an opportunity  to be  heard by  the Commissioner.  From the facts as  set out,  it is  apparent that  the respondent was served with  a notice of proposed revision on 21.3.1975. The reasons  for   such  revision   were  communicated   to  the respondent on 2.5.1975. The respondent had furnished written submissions to the Commissioner which were considered at the hearing  of  the  case.  After  furnishing  the  grounds  of revision the  hearing of  the case  was fixed  on 7.5.19075. There is nothing on record to sow that the respondent wanted more time  or  had  asked  for  more  time.  The  respondent appeared through  his advocate on 7.5.1975 and submitted his written arguments.  Thereafter the Commissioner has passed a detailed order  on 26.5.1975.  Looking  to  these  facts  it cannot be  said that a reasonable opportunity of hearing was not given to the respondent.      In  the  premises  the  appeals  are  allowed  and  the impugned judgment  and order of the High Court is set aside. There will, however, be no order as to costs.